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"If an arms dealer makes huge charitable donations, he will still be viewed as an arms dealer."—Simon Rostron

By Neil Wilson

While
bankers bore the brunt of the public’s wrath after
the financial crisis of 2008, hedge fund people have not gotten
off scot-free. They are still widely viewed with suspicion-as
people who are often fabulously wealthy but not deserving of
it, as people who are making money at the expense of others in
a zero-sum game.

And if you think the reputation of hedge fund managers is
questionable within the United States, it is often a lot worse
in continental Europe. To many Europeans, hedge funds represent
everything that is big, bad and dangerous about the capitalist
world.

The industry seems to have found it difficult to deliver a
positive message about its role in the economy-how, for
instance, it enhances the efficiency of markets-which is
understandable, as it is a complicated story to get across to
the public.

But one might have thought hedge funds would be more
successful improving their image via the large-scale and
sometimes highly conspicuous philanthropic efforts that many
people in the industry engage in.

Hedge fund managers, either individually or in groups, have
for many years been prominent in supporting charitable causes.
Industry legend George Soros, for instance, has set a strong
example via his Open Society Foundations, and he has a genuine
claim to being among the greatest philanthropists of all
time.

Many other leading managers have their own foundations and
endowments or contribute to industry-wide groups like the Robin
Hood Foundation in the United States or Absolute Return for
Kids (ARK) in Europe. Robin Hood and ARK may be the biggest of
these groups, but there is a long list of others as well, such
as 100 Women in Hedge Funds and Hedge Funds Care, plus events
that raise money from the industry for other charities, such as
a dinner held by the Prince’s Trust, headed by
Prince Charles in the UK.

One might have thought that such efforts would garner some
degree of approval, if not admiration, among the public. But
even this is not always the case. As Simon Rostron, a veteran
of public relations in the industry with London PR firm Rostron
Parry, wryly noted during a panel session at the InvestHedge
Forum in London: "If an arms dealer or pornographer makes huge
charitable donations, he will still be viewed as an arms dealer
or pornographer."

At the forum there was at least a vigorous debate about
whether the industry’s image problem is just a PR
problem or something more fundamental-assuming that a PR
problem in itself is not a pretty fundamental problem. Lucy
Heller, the head of ARK Schools, made the excellent point that
in some circles, and especially in Europe, money and wealth are
simply not acceptable. She was pessimistic about whether the
image could be improved, with ignorance about the industry
still prevalent. As Heller put it: "We’re damned
if we do and damned if we don’t!"

During some lively exchanges with delegates from the floor,
one piped up to say that the image of ARK itself might be
improved if it was seen as less synonymous with Arpad "Arki"
Busson, head of EIM and ARK’s founding chairman,
whom the speaker described as "frankly, more flashy" than he
and many others in the industry felt comfortable with. While
this comment provoked laughter, it also highlighted that some
of the other leading figures in ARK have probably been quite
happy for Busson to play the front man who takes the limelight,
while they remained more in the background.

What this shows to me is that although many charitable
efforts are no doubt meaningful and effective and should
certainly be encouraged, there is not necessarily one right way
to go about giving. One way, for instance, is that of
ARK’s new chairman, Ian Wace, co-founder of
Marshall Wace. Wace has been active with ARK since its
foundation and has been keen throughout to be seen setting a
strong example to others in the industry to take their
responsibilities to society seriously.

On the other hand, there are many others in the business who
contribute a lot, either through ARK or their own independent
efforts, but prefer to do so quietly and privately. That also
seems a perfectly reasonable approach to me.

Either way, as ARK’s Heller pointed out,
industry philanthropists still run the risk of being
characterized as providers of "blood money."

So, while the industry’s various charitable
initiatives can and no doubt will continue to make a positive
contribution, only when the wider public appreciates the
economic value of hedge funds-how they enhance the functioning
of capital markets, deliver value for investors and generally
behave as responsible corporate citizens-will the industry
decisively overcome its continuing image problem. AR

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